Profit growth through Quality, Value & Consistency
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Profit growth through Quality, Value & Consistency Retail Agreements trip – 24 th June, 2010. Introduction Ralph Findlay Chief Executive. 2. KPI analysis. Substantive: 85% of estate as at 14 May. Presentation name > date. Trend improvement on all metrics, focus on profit growth. 3.

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Profit growth through Quality, Value & Consistency

Retail Agreements trip – 24th June, 2010


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Introduction

Ralph Findlay

Chief Executive

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KPI analysis

Substantive: 85% of estate as at 14 May

Presentation name > date

Trend improvement on all metrics, focus on profit growth

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Development of tenanted and leased pubs

  • MPC performance has benefited from relationships based on:

    • Openness, transparency

    • Fair rents, fair share of risks and rewards

    • Sustainability

  • Licensees have benefited from:

    • Flexibility on rents, discounts where required

    • Significant levels of business development support

  • Our view: regulatory and market pressures are here to stay

    • Competitive pressures on independent operators will continue

    • The ‘bar’ for successful operators is being raised: regulation, market trends, funding, quality

    • A different approach can provide an effective response

Presentation name > date

The ‘bar’ for long term success has been raised

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Alistair Darby

Managing Director

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Quality, Value & Consistency

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Industry

Beer pricing

Brulines

Repairs

External

Lending Legislation

BEC/OFT

Consumer

Demanding

Flight to value Beer sales 

Competitor

Skills

Food

Retailer power

Good pubs adapting, average pubs under pressure

Spring 2009: What were tenants up against?

Tenants

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Sales drop, costs rise, cash drains

Standards decline

Consumers lose confidence

Business failure

Churn

Pub users’ trust broken

Impact – Spiral of decline

Presentation name > date

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Spring 2009: Why come here?

No quality, no value, no consistency

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Dispose or retain?

  • Two key considerations

    • is there a sustainable turnover opportunity?

      • Marston’s current assertion £3.5k - £4k per week minimum

    • can an appropriate ROC be achieved?

      • Marston’s target 10% ROC

  • If the answers above are yes, then the pub has long term viability, otherwise disposal is inevitable

    • can foresee 8k-10k fewer pubs over the next 5 years.

    • mainly for alternative use

  • But a different approach is required

    • new approach must have longevity

Turnover and ROC determines future of pub - but new models required

Presentation name > date

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More options to improve result

Change absolutely necessary

Two operating solutions

CONTROL

(600 pubs)

Retail Agreement

INCENTIVISATION

(1,000 pubs)

New Lease

Advance

Ultra-Advance: free of tie

Presentation name > date

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Opportunity to flex risk/reward mix

Development of lease agreements

  • c.1,000 pubs will continue to be operated as leases

    • 5 – 30 years

    • Assignable

    • New lease: no RPI on rent

  • Widespread availability of Advance agreement

    • Free trade pricing model

    • Direct debit payment, online ordering

    • Extra discounts greater than additional charge

  • Free of Tie option to be made available from July 2010

    • No machine tie

    • Limited take up anticipated

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Retailer receives 20% (min) of net take

Marston’s responsible for costs except staff

Control via EPOS/stock-taking

33 pubs per BDM

Retail offer from Marston’s eg Sky

5 year term, non L&T, assignable

Very attractive franchise-style features

Retail Agreement

Presentation name > date

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To fix unappealing pub

Average £50k capex per pub

£10k infrastructure

£30k sparkle

£10k F&F

Target 20% ROIC

Ongoing maintenance - equivalent to tenancy

Re-establish reputation, then maintain

Role of Capital Investment

Presentation name > date

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Significantly larger recruitment pool

Who is attracted to run a Retail Agreement?

  • Managed operators from pubs and High Street

  • Tenanted pub model rejecters

  • Small business start ups

  • Franchisees

Presentation name > date

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Why people come to these pubs

Quality, value, consistency

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Why people come to these pubs

Quality, value, consistency

Presentation name > date

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Quality, value, consistency

Why people come to these pubs

Presentation name > date

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Why people come to these pubs

Quality, value, consistency

Presentation name > date

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Profit growth through quality, value & consistency

The results

Albion

Robin Hood

Volume and profit exceeding historical highs

Presentation name > date

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Profit growth through quality, value & consistency

The results

Old Sal

Priory

Volume and profit exceeding historical highs

Presentation name > date

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On track to 100 by October ‘10

Number of pubs open 78

Profit uplifts on target

Few teething problems with only 3 or 4 pubs needing work

Low retailer churn

Update on progress

Strong foundations for roll-out

Presentation name > date

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Retail Agreement: target – 600 pubs

  • Target EBITDA uplift - £10k per pub (20% EBITDA ROC)

  • Key objectives

    • Increased consumer appeal

    • Increased market share

    • Response to market trends – ‘F-Plan’

    • Reduced overheads

    • Reduction in % of income derived from tenanted and leased model

* cumulative

Clear growth plan focused on delivery of high ROC

Presentation name > date

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Substantive estate in profit growth

New lease highly attractive to entrepreneurial licensees

Retail agreements performing well

Range of options to drive results

Profit growth through quality, value & consistency

Clear growth plans

Presentation name > date

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Any questions?

Presentation name > date

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